Without the BJT , LED is always ON and only OFF when a magnet is brought close to the hall effect sensor. I am trying to invert the signal such that it is ON only when magnet is brought closed to the hall effect sensor.

Could anyone please point out my mistake why it is not working? Now when I bring the magnet closed to the hall effect sensor , it doesn't turn ON at all.

The way you have it connected, the Hall effect sensor turns on the transistor (allowing it to conduct). Now, starting from the positive voltage rail, think about which makes an easier path to ground,
(a) going through the transistor or
(b) going through the LED?

Do you understand why the LED is on when the Hall effect is not sensing a magnet?

Now, try moving the LED between your NPN transistor and the 1000 ohm resistor just above the NPN. See what happens?